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September 6, 2012

7 U.S. Presidents Who Flopped Financially

Becoming president doesn’t mean you’re as successful with your money as with your career

Eight of these presidents, rendered in wax by Madame Tussauds, preseved their wealth, one did not. (Photo: AP)

These days it’s assumed that any presidential candidate is relatively wealthy. The degree of that wealth can range from a few million like President Barack Obama, made mostly from his two best-selling books before his presidency, to the mega-bucks of Gov. Mitt Romney, made from inherited wealth and a successful private equity career. Even relatively poor chief executives, like Bill Clinton, have wealthy benefactors who help them until that autobiography hits the best-seller list.

The annual salary of the president today is $400,000, last raised in 2001, and it includes a $50,000 expense allowance. After leaving office a former president will earn a taxable pension of $199,700 per year.

In the 19th century, things were a little different. Several presidents, Thomas Jefferson for instance, saw their finances melt down after serving the nation. Part of the problem was that in the early days of the nation, presidents were responsible for paying for travel, diplomatic entertaining and the salaries of their staffs. Expenses ate into the proscribed annual salary of $25,000 (adjusted for inflation, that's $316,000 today) that did not rise until 1873.

By 1949, when the salary for the first time reached $100,000 ($904,000 today), plus a nontaxable expense account of $50,000, it had been decades since anyone of less than considerable wealth had ascended to the nation’s top office.

It must have been quite an amazing moment for Harry Truman when his salary reached six figures. As a young man, Truman had been on the brink of bankruptcy. It was the classic tale of the American dream that any boy can grow up to be president.

Here’s AdvisorOne’s look at 7 U.S. Presidents Who Flopped Financially:

1. Thomas Jefferson: 1801-1809

The nation’s third president might seem an unlikely candidate for bankruptcy. His Virginia estate, Monticello, his work as an inventor and his interest in science all add up to the image of a wealthy landowner who was free to help lead a revolution—the Revolution.

But things are often not what they seem. Growing tobacco in colonial Virginia was risky and often left landowners in debt because of loans taken out to purchase crops. This was the case for Jefferson. Add to that a debt of about $10,000 ($137,000 today) incurred conducting the nation’s business while president and a downturn in land values after the Louisiana Purchase, and the seeds were sown for a financial meltdown.

As he neared the end of his life in 1826, according to Monticello.org, the debts had mounted, causing Jefferson to hatch a lottery scheme with his estate as the big prize. The state legislature assented to the idea. The idea was to raise enough money to pay off the debts and help his heirs. Intervention by private citizens urging Jefferson to raise the money through private subscriptions stopped the lottery. Jefferson died before more than a fraction of the approximately $100,000 ($1.9 million today) needed was raised. His heirs sold off Monticello and its slaves by 1831.

2. James Monroe: 1817-1825

Being in politics was not lucrative in the early days of the republic. Ambassadors and even presidents had to pay the salaries of their personal staffs. That combination of jobs led James Monroe, our fifth president, to be deeply in debt when he retired to Oak Hill, his Virginia estate. Needing $75,000 ($1.5 million today) to become solvent, Monroe received a gift from Congress that helped ease his debt. Still, he sold his property in 1830, living the last year of his life with his daughter’s family in New York City, where he died on July 4, 1831, the third early president to pass away on the nation’s birthday.

William Henry Harrison has the distinction of having been, until Ronald Regan, the oldest man to assume the office of president at 68. He also, because of his two-hour inaugural speech on a cold, wet day without an overcoat or hat, spent the least amount of time in office. He lasted just 31 days before pneumonia ended his life. At one point in his life, Harrison, the son of a signer of the Declaration of Independence, was wealthy, having married into money. He also inherited a 3,000-acre Virginia estate from his mother. He eventually sold the estate to his brother, while retaining title to a home he built in Indiana.

Still, after decades of service in the military and politics, Harrison died penniless. His widow, Anna, hadn’t even arrived at the White House during his presidency, but she did manage to enter the history books. Congress granted her an annual pension equal to the presidential salary of $25,000 ($522,000 today) along with franking privileges. She was the first former first lady to receive such largess.

4. Abraham Lincoln: 1861-65

No list of presidents with financial problems would be complete without Honest Abe. The stories of his failures are legion, but also mostly not accurate, as delineated by snopes.com, which leaned heavily on “Lincoln” by David Herbert Donald. He was born of humble origins and the first store he managed, in 1831, did go bankrupt. But that was more because the owner was a poor businessman than any failings on the part of the future president. A later store Lincoln owned did go under. His partner died leaving no assets. Lincoln assumed the debts of his partner of his own accord and over several years paid them all off.

A successful lawyer by the time he became a national political figure, Lincoln had elevated himself and his family far above his humble frontier beginnings. That didn’t stop his wife, Mary, from overspending the public funds allotted for sprucing up the shabby White House furnishings. Lincoln’s legacy, of course, is far greater than any financial reverses could obscure.

5. Ulysses Grant: 1869-77

The story of the general that saved the Union during the Civil War and his scandal-plagued presidency is well told. By most accounts, Ulysses Grant was an honorable man who was too trusting of associates in his Cabinet and later in business. After his presidency, he and his namesake son each invested $100,000 ($2.2 million today) in a brokerage firm that would carry their name. His Wall Street genius partner stole all the money, including funds invested by war vets and others. Ferdinand Ward went to prison and the Grants were left penniless. The former president famously wrote his memoir of the Civil War as he neared death. Mark Twain turned it into one of the best-selling books of all time, ensuring the family’s fortune.

6. William McKinley: 1897-1901

William McKinley’s assassination in 1901 has likely obscured the fact that in 1893 his personal finances were in disarray. McKinley had enjoyed a steady rise from county prosecutor in Ohio in 1869 to longtime congressman and head of the House Ways and Means Committee and finally the presidency. At the time of his meltdown, he was Ohio’s governor. He had co-signed a $100,000 ($2.4 million today) note to help a friend’s business. The business went bust in the panic of 1893 and McKinley was left holding the bag. Businessman and political boss Mark Hanna bailed McKinley out, enabling him to avoid declaring bankruptcy. The voters didn’t seem to mind, re-electing McKinley to another term and then sending him to the White House twice.

7. Harry Truman: 1945-53

He might have been the president known for “giving ’em hell,” but Harry Truman was another who came perilously close to bankruptcy. The haberdashery he ran with a partner went belly-up in 1922, and family and friends reportedly urged him to file for bankruptcy. Truman would have none of it. He repaid the debts over the years, sticking to his humble Missouri roots. Truman would be front and center on at least one topic of this year’s campaign. When President Lyndon Johnson signed Medicare into law, he gave Truman credit for getting the ball rolling by calling for a national health insurance plan nearly two decades earlier. He and his wife, Bess, were honored as the first two enrollees in Medicare.